Irish exploration group Providence Resources has signed a farm-out agreement with ExxonMobil, the world's largest oil and gas company. The agreement, which relates to the Dunquin Prospect in the Porcupine Basin off the west coast, has the potential to produce enough oil and gas to power the whole of western Europe, according to Providence chief executive Tony O'Reilly Jnr.
Under the terms of the agreement, US oil giant ExxonMobil will conduct a significant exploration programme on the site in return for 80 per cent of the prospect. Providence's existing 80 per cent stake will fall to 16 per cent, while its partner in the venture, Sosina Exploration, will see its stake fall from 16 per cent to 4 per cent. Subject to approval by the Government, ExxonMobil will fund all the drilling.
According to Mr O'Reilly, the Dunquin field is estimated to contain up to 25 trillion cubic feet of natural gas and four billion barrels of oil. Providence's shares rose 25 per cent in Dublin and 27 per cent in London, where they trade on the AIM. The stock closed at 61 cent and 4.3 pence respectively.
"This is a very exciting development for our company and for anyone involved in exploration off the coast of Ireland," he said. "The entry of such a large player in the Irish market is a great endorsement to the project."
Minister for Communications, Marine & Natural Resources Noel Dempsey also welcomed the agreement. "The area is one of the most potentially promising areas off Ireland's coast and I am pleased this agreement will lead to its further exploration," he said, adding that the re-entry of ExxonMobil into the Irish market was particularly welcome.
Job Langbroek, an analyst at Davy, described the move as "very good news" for Providence. The deep underwater drilling that is required as part of the project is very expensive and ExxonMobil is one of the few companies that has the resources to undertake it, he said.
However, Mr O'Reilly said that while the company is very excited about yesterday's announcement, it will continue to focus on its other Irish, Nigerian and UK projects.
He said the group hopes to make significant progress at its Spanish Point site, also off the west coast, this year. Providence earlier this month agreed a four-year €50 million revolving credit facility with Macquarie Bank.
